Riding out market swings with low volatility investing

Indian equity markets have rewarded long-term investors with strong gains over three, five, and ten-year periods. Yet, the past twelve months have been different. Broader indices have slipped about 4%, creating a sense of unease for retail investors who had grown accustomed to steady compounding. These swings are part and parcel of equity investing, but they can test patience. That is why strategies that focus on lower volatility attract attention during such phases. They may not capture every surge in a roaring rally, but they help smooth the ride when markets stumble. 

Decoding low volatility

Volatility measures the extent to which an asset or security’s price fluctuates over time, typically expressed as the standard deviation of its returns.  Simply put, it reflects the degree of price movement. Fewer swings translate to a steadier experience, making it easier for investors to remain committed for the long run. The large-cap focused Nifty 100 Low Volatility 30 Index captures this principle. 

The Nifty 100 Low Volatility 30 Index is what is called a smart beta index. It is built around the “low volatility” factor, which means it picks 30 stocks from the Nifty 100 universe that have shown relatively stable price movements. By focusing on companies with a track record of lower fluctuations, the index aims to give investors equity exposure with a steadier experience compared to the broader market. This is because it assigns higher weights to the most stable stocks. The index is rebalanced semi-annually.

The index’s approach tilts the portfolio toward consistency and cushions portfolios in uncertain times. This is why exchange traded fund variant like Nifty 100 Low Vol 30 ETF, and fund of funds offering like Nifty 100 Low Vol 30 ETF FOF bear consideration. 

How returns fare

Over time, the Nifty 100 Low Volatility 30 index strategy has shown that stability can coexist with growth. 

As on August 29, 2025, the Nifty 100 Low Volatility 30 index delivered around 19.5% in the last five years. Since inception, the compounded annual growth rate stood close to 17.8%. 

In contrast, Nifty 50 has provided 17.91% in the last 5 years and 12.8% since inception. 

History shows that the Nifty 100 Low Volatility 30 has tended to fall less during major market downturns. In periods such as the global financial crisis, the European debt crisis, the 2015–16 market sell-off, and the Covid-19 shock, this index saw smaller drawdowns compared to the Nifty 100 and Nifty 50. By cushioning losses in tough times, the strategy helps investors stay invested with greater confidence and discipline.

Thus, the low volatility underlying index’s ability to generate healthy returns while limiting drawdowns compared to the broader market comes to the fore.

Ways to access the index

Investors do not need to worry about replicating the Nifty 100 Low Volatility 30 index on their own. The strategy is available through an Exchange Traded Fund (ETF) route and a Fund of Fund (FOF) option. 

Nifty 100 Low Volatility 30 ETF trades on the stock exchange just like a share. This makes it a good option for investors who already have a Demat account and like transacting directly. 

On the other hand, the Nifty 100 Low Volatility 30 FOF brings the same exposure through the mutual fund route, without the need for a Demat account. It supports SIPs and is often the easier entry point for beginners. Both formats track the same index, so the choice comes down to convenience and comfort. Both are cost-effective options.

Usefulness

Low volatility investing offers an appealing blend of growth potential and relative calm. The index represents a diversified set of large, established companies across fast moving consumer goods, healthcare, financials, automobiles, technology, and more.

The underlying strategy is rule-based and transparent. This approach helps remove biases in selection. For conservative investors, this can serve as a core equity holding. For more aggressive investors, it can complement other funds by bringing balance to the portfolio.

Recent swings have shown that markets can test even experienced investors. The Nifty 100 Low Volatility 30 Index, and the ETF and FOF built on it, make it possible to combine equity growth with a steadier journey. 

For retail investors looking for
long-term wealth creation without constant stress, this may well be the calmer route to stay invested.